The Proposed 340B Drug Pricing Program Omnibus Guidelines Have Landed

ThinkstockPhotos-477811161It is official: The Health Resources and Services Administration (“HRSA”) has published the long-awaited “Mega Guidance.” The Proposed 340B Drug Pricing Program Omnibus Guidelines (“Guidelines”) were published in the Federal Register on August 28, 2015. Any comments must be submitted on or before October 27, 2015.

The proposed Guidelines aim to “add clarity in the marketplace for all 340B Program stakeholders and strengthen the [U.S. Department of Health and Human Services’] HHS’s ability to administer the 340B Program.” This clarity will likely prove useful to manufacturers in the wake of the June proposed rulemaking, which proposed to authorize the HHS Office of the Inspector General to pursue civil monetary penalties from manufacturers for violation of the 340B Program requirements.

From a covered entity’s perspective, one of the most significant changes the proposed Guidelines make to existing law, guidance, and resources from HRSA and its contracted 340B Prime Vendor, Apexus, is the definition of a patient. Briefly, 340B Program covered entities may only provide covered outpatient drugs to “patients.” As it stands now, an individual is a patient of a 340B covered entity (with the exception of State-operated or funded AIDS drug purchasing assistance programs) only if:

  1. The covered entity has established a relationship with the individual, such that the covered entity maintains records of the individual’s health care; and
  2. The individual receives health care services from a health care professional who is either employed by the covered entity or provides health care under contractual or other arrangements (e.g. referral for consultation) such that responsibility for the care provided remains with the covered entity; and
  3. The individual receives a health care service or range of services from the covered entity which is consistent with the service or range of services for which grant funding or Federally-qualified health center look-alike status has been provided to the entity. Disproportionate share hospitals are exempt from this requirement.

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Finally! HRSA Proposes Manufacturer Civil Monetary Penalties

On June 17, 2015 the Health Resources and Services Administration (“HRSA”) finally published its much anticipated proposed rule, the 340B Drug Pricing Program Ceiling Price and Manufacturer Civil Monetary Penalties Regulation. Comments must be submitted via the online portal, email, or US Mail by August 17, 2015. Keep in mind, all submitted comments will be available to the public in their entirety.

The proposed rule begins with ThinkstockPhotos-163712138a discussion of HRSA’s authority to promulgate rules regarding ceiling prices and civil monetary penalties, and notes that HRSA’s orphan drug restriction was recently vacated by the United States District Court for the District of Columbia. It also touches on the proposed rules before it.

The proposed rule modifies the summary, definitions, and eligible entities sections of 42 C.F.R. Part 10 (the 340B Drug Pricing Program) and deletes the definition of covered outpatient drug and the orphan drug restriction sections. Finally, it creates a section regarding manufacturer civil monetary penalties.

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Near Miss on Congressional Overhaul of 340B Program

Thumbs_Up_Down_iStock_000017128753MediumIn just a matter of days, changes to the 340B Program were proposed and then withdrawn from H.R. 6, The 21st Century Cures Act. Had hospitals, health systems, and related lobbying groups not been closely watching the Act, the changes might have quietly gone through when the 21st Century Cures Act was unanimously passed out of Committee on May 21, 2015.

The 21st Century Cures initiative, advanced by the House Energy & Commerce Committee and spearheaded by committee chairman, Michigan Representative, John Upton, had been underway since last year. The Act covers matters affecting the regulation of pharmaceuticals, medical devices, biotechnology, and reimbursement and funding for medical research. Issues relative to 340B were never part of this legislative package.

Nevertheless, in the final weekend before voting, Committee staff distributed a new Discussion Draft containing provisions that would affect the 340B Program. Hospitals, health systems, and related lobbying groups caught wind of these changes and swiftly drafted letters to Chairman Upton and leaders in the U.S. House and Senate.

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How Much Will You Pay for an Inaccurate 340B Ceiling Price?

Money and Justice iStock_000014343429MediumUnder the authority granted it by the Patient Protection and Affordable Care Act, the Health Resources and Services Administration (HRSA) is moving forward to laying the groundwork for imposing civil monetary penalties on manufacturers that overcharge covered entities under the 340B Program.

HRSA has submitted its second Information Collection Request (ICR) regarding calculation and verification of 340B ceiling prices. Interested persons only have until May 21, 2015 to weigh in. Comments must be submitted to the desk officer for HRSA, either by email to or by fax to 202-395-5806.

340B Program manufacturers have a statutory obligation to provide covered outpatient drugs to covered entities at no greater than the 340B ceiling price. The 340B ceiling price refers to the maximum amount a manufacturer may charge a covered entity. Currently, this 340B ceiling is calculated by HRSA, using pricing information which manufacturers are required to submit to the Centers for Medicare and Medicaid Services (CMS).

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Key Dates Approaching for Title X Family Planning Grantees in the 340B Program

iStock_000009538910SmallMark your calendars! Calling all Title X Family Planning clinics that participate in the 340B Program—recertification opens May 13, 2015 and that means 340B Participant Change Forms must be submitted before that date.

Online 340B Participant Change Forms take between five and ten days to process. These forms will not be processed during recertification. However, change requests for Authorizing Officials (AOs) will be processed during recertification—a change to last year’s recertification procedures.

Recertification for Title X Family Planning clinics that participate in the 340B Program opens on May 13, 2015 and closes four weeks later on June 10, 2015. AOs and Primary Contacts can expect to receive a reminder email from the Office of Pharmacy Affairs (OPA) on May 11, 2015. On May 13, 2015, the AO will receive an email with the covered entity’s unique username and password from the OPA, which will instruct the AO to recertify the entity.

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340B Reform Legislation: Is Anything in the Offing?

As readers of this blog already know, manufacturers and some legislators believe the 340B program has grown too large, suffers from mission creep and needs reform. They argue that the program’s purpose is simply to reduce drug costs for the uninsured and the indigent, nothing more. All three of the federal agencies with program oversight (HRSA, GAO, and the HHS OIG) see its purpose as helping safety-net providers stretch scarce resources.

Spoonful_Pills_101337746These three agency viewpoints were presented on March 24, 2015 at a hearing held by the House Energy & Commerce Health Subcommittee. The subcommittee’s original news release announcing the hearing stated that its members would review the functionality of the program “to ensure it is meeting its goal of improving access to prescription drugs for needy patients at facilities serving these populations.” A later announcement took a blander tone:  “Subcommittee members will review the functionality of the program to ensure it is meeting its intended goals.” This may be indicative of some disagreements behind the scene, as views on the intent of the program continue to evolve. It is not inconceivable that there could be an effort over the next couple of years to clarify the intent in new legislation.  One subcommittee member even invited HRSA to be more forthcoming in requesting more legislative authority if needed.

The questioning at the hearing revealed the political fault lines on this topic. Republicans seemed more concerned about the lack of any legal requirement for covered entities to account for their uses of 340B savings, while Democrats seemed more supportive of allowing the program to generally improve access to care for the underserved. However, both parties seem to agree that improved program oversight is needed.

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340B Program Covered Entities: Some Items for Your Worry List

When 340B covered entities contemplate the future, they can find a number of issues to worry about. Here is a thumbnail on some of them.

Orphan Drugs

There is a possibility that the orphan drug issue will be resolved unfavorably to covered entities. That issue arises out of a 2014  court decision, Pharmaceutical Research and Manufacturers of American v. Department of Health and Human Services (May 23, 2014). In that case, the Pharmaceutical Research and Manufacturers of American (PhRMA) challenged HRSA’s authority to promulgate a legislative rule requiring manufacturers to provide 340B discounts on orphan drugs when used for non-orphan indications. The district court found that HRSA did not have authority to engage in legislative rule-making on that subject. HRSA has since issued a virtually identical interpretive rule requiring manufacturers to provide 340B discounts to covered entities on orphan drugs used for non-orphan indications. To reinforce its position, HRSA has recently posted on its website a list of the manufacturers who are not following this rule, stating that this will assist states in pursuing appropriate rebates, since there is no risk of duplicate discounts.

Meanwhile, back in the courts, PhRMA has again sued HRSA, this time to challenge its interpretive rule. In a motion seeking summary judgment, PhRMA accuses HRSA of “dressing a vacated regulation in the new clothing of an interpretive rule and attempting to circumvent the law.” Covered entity access to orphan drugs for non-orphan indications at 340B discounts continues to hang in the balance. Continue Reading

The Message Is Clear from OPA Director Pedley

MegaphoneCovered entities should be constantly preparing for  audit.  That  was the message, loud and clear, from Office of Pharmacy Affairs Director, Cmdr. Krista Pedly, who spoke by webcast  at the recent Winter Conference of the 340B Coalition in San Francisco.  That preparation, she said, should include making use of the compliance tools available through Apexus (the contractor for HRSA’s Prime Vendor Program), doing self audits, and attending 340B University (the educational programs periodically offered by Apexus).

The Prime Vendor Program provides OPA with information on purchases and sales and acts as an early warning system for possible non-compliance in that area.  OPA is working on having a secure website ready in 2015 where ceiling price information can be accessed.

HRSA has conducted 277 on-site audits since 2012, which included examining 3290 outpatient facilities and 8500 contract pharmacy locations.  All audits done in FY12 have been finalized, but only 18 of the 99 audits done in FY14 have been finalized.  This means that a lot of covered entities remain in the dark about how best to achieve compliance.

Summer 2015, perhaps June, is the target date for issuance of the “mega  guidance”, which will address, among other topics, covered entity recertification, audits, and prevention of duplicate discounts,  including in the context of Title XIX managed care.

All stakeholders will have an opportunity to comment on this guidance.  Several notices of proposed rulemaking can also be expected this year.  These will deal with civil money penalties, the calculation of ceiling prices and administrative dispute resolution. Continue Reading

340B Covered Entities: What to Expect When OPA Comes Knocking


Now that OPA has ramped up its audit activities, covered entities should not be surprised to find themselves on the receiving end of a 340B program review conducted by HRSA/OPA.  The likelihood of this may be increased if the entity uses contract pharmacies.  It is important therefore to be aware of what information is likely to be requested.  This could include documentation showing the entity’s basis for eligibility in the 340B program.  (This underscores the need to keep all information in the OPA database accurate and current, including information for all covered entity sites and contract pharmacies.)

The covered entity will also have to produce its organizational chart reflecting the individuals or positions responsible for administering and supporting the 340B drug program and non-340B drugs if applicable.  The covered entity ought to be able to provide a brief narrative providing an overview of its 340B program and how that program is implemented and managed. Continue Reading

340B Program Participants: It’s Time to Ramp Up Compliance


340B covered entities need to revisit and perhaps ramp up their compliance efforts.  The director of the Health Resources and Services Administration’s Office of Pharmacy Affairs has been very open in touting the fact that HRSA has invested in program integrity to make sure that manufacturers and covered entities remain compliant and that benefits for the intended beneficiaries of the 340B program are maximized.

To this end, OPA has created a third branch devoted to program performance and integrity.  This branch will be focusing on audit activity and educating covered entities and manufacturers about compliance.  Part of the education effort will include posting any agreed upon corrective action plans on the OPA website, as a public mea culpa from the audited entity for the edification of all other covered entities.

HRSA expects covered entities to self-report any identified breaches in their compliance obligations.  HRSA is also adding some teeth to the compliance effort by adding questions about compliance to the process by which it reviews applications for grants from HRSA.  Continue Reading